Abrams
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Abrams Company
CASE STUDY ANALYSIS ON MANAGEMENT CONTROL SYSTEMS
CASE CONTEXT
Abrams Company is a manufacturer of parts for use in automobiles, trucks, buses and farm equipment. They produce three major groups of parts: ignition, transmission and engine parts. These products are sold to Original Equipment Manufacturers (OEMs) and wholesalers. The wholesalers, in turn resold the parts to “aftermarket” (AM).
ABRAMS COMPANY ORGANIZATION (Partial):
Product Division
Managed by a VP& GM, expected to earn a target ROI.
Responsible for production and selling major of parts produced to OEMs.
Have separate OM Sales dept. that works with OEMs in developing new products or changing existing products.
Remaining parts are sold to AM marketing division.
AM Marketing Division
Managed by a VP&GM solely responsible for marketing Abrams entire line of parts to AM wholesalers.
1992 Total Sales is $500M. Breakdown: $130M Ignition parts, $100M transmission parts, $90M engine parts and $180M AM Division sales.
ROI Calculation
Profit- overheads- imputed taxes
Totals assets – current liabilities
For each plant, a target ROI was calculated. Each product divisions OEM sales were traced to the plants that made the parts.
Book value was used to value property, plant, and equipment.
OEM Sales performance